UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Amendment
No. 1 to Form 10K-SB




x
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the fiscal year ended December 31, 2007




o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from ___________ to ___________





Commission
file number 000-15893




CHINA
YINGXIA INTERNATIONAL, INC.


(Exact
name of registrant as specified in its charter)




Florida
            65-0664961(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)Harbin
      Yingxia Industrial Co., Ltd, No.300, Xidazhi Street Nangang, Harbin
      Heilongjiang
            150001(Address
      of principal executive offices)
            (Zip
      Code)





Registrant’s
      telephone number, including area code:
            86
      451 86310948




c/o
      American Union Securities 100 Wall Street 15th Floor New York,
      NY
            10005(Address
      of principal agent offices)
            (Zip
      Code)





Agent’s
      telephone number, including area code:
            (212)
      232-0120





Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class
            Name
      of each exchange on which registeredNone
            NoneSecurities
      registered under Section 12(g) of the Exchange Act:Common
      Stock, par value $.001(Title
      of class)




Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No o




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x





State
issuer’s revenues for its most recent fiscal year. $15,912,318




Aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Company as of March 27, 2008: $24,856,943
 Number of shares of the registrant’s Common Stock outstanding as of March 27,
2008: 44,479,787.




1




TABLE
OF CONTENTS








Part
      I
            
            PageItem
      1.
            Description
      of Business.
            3Item
      2.
            Description
      of Property.
            8Item
      3.
            Legal
      Proceedings.
            8Item
      4.
            Submission
      of Matters to a Vote of Security Holders.
            8Part
      IIItem
      5.
            Market
      for Common Equity and Related Stockholder Matters.
            9Item
      6.
            Management’s
      Discussion and Analysis or Plan of Operations.
            10Item
      7.
            Financial
      Statements.
            16Item
      8.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
            17Item
      8A.
            Controls
      and Procedures.
            18Item
      8B.
            Other
      Information.
            18Part
      IIIItem
      9.
            Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act.
            19Item
      10.
            Executive
      Compensation.
            20Item
      11.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
            22Item
      12.
            Certain
      Relationships and Related Transactions.
            22Item
      13.
            Exhibits.
            23Item
      14.
            Principal
      Accountant Fees and Services.
            23Signatures
            
            24








Except
as otherwise required by the context, all references in this prospectus to "we",
"us”, "our", “CYXI”, or "Company" refer to the consolidated operations of China
Yingxia International, Inc., a Florida corporation, and its wholly owned
subsidiaries.




Forward-Looking
Statements and Associated Risks






The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
certain forward-looking statements. Some of the statements contained in this
annual report of the Company discuss future expectations, contain
projections of our operations or financial condition or state other
forward-looking information. Some statements contained in this annual report on
Form 10-KSB that are not historical facts (including without limitation
statements to the effect that we "believe," "expect," "anticipate," "plan,"
"intend," "foresee," or other similar expressions) and are forward-looking
statements. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments affecting us
will be those anticipated by us. All comments concerning our expectations for
future revenue and operating results are based on our forecasts of our plan of
operation and do not include the potential impact of any future acquisitions or
operations. These forward-looking statements involve significant risks and
uncertainties (some of which are beyond our control) and assumptions. Should one
or more of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material respects from
those projected in the forward-looking statements.








2






PART I


Item 1.Description of
Business.




Business
Development





China
Yingxia International, Inc. (the “Company” or “China Yingxia”) was incorporated
in the State of Florida on May 6, 1996 and formerly known as Agronix, Inc.
(“Agronix”).




On May
12, 2006, the Company entered into a share exchange agreement with Warner
Nutraceutical International, Inc. (‘WNI”), which is the parent company to Harbin
Yingxia Business Group Co, Ltd. ("Yingxia"). Pursuant to the share exchange
agreement, the Company issued to WNI shareholders 54,811,475 shares of Common
Stock, par value $0.001 per share, and 1,473,649.074 shares of Class A Preferred
Stock, par value $0.001 per share, of which each share is convertible into
five hundred (500) shares of the Company’s Common Stock. As a result of the
transactions, there has been a change in control of the Company as the
shareholders of WNI became the majority shareholders of the
Company.






For
accounting purpose, the transaction has been accounted for as a reverse
acquisition under the purchase method. Accordingly, WNI and its subsidiary are
treated as the continuing entity for accounting purposes. Following the merger,
Agronix filed a Certificate of Amendment and changed its name to China Yingxia
International, Inc.






On July
21, 2006, the Company’s board of directors approved a reverse stock spilt on
both common stock and preferred stock.  Each 24.9 shares of the
Company's Common Stock and Class A Preferred Stock were converted into one (1)
share of Common Stock and one (1) share of Class A Preferred Stock,
respectively. Simultaneously, all of the preferred shares were converted into
common shares at ration of 1 to 500 and the preferred shares were
cancelled.






The
Company operates its business through its wholly-owned subsidiary Harbin Yingxia
Business Group, Ltd. (" Harbin Yingxia"), a joint stock corporation organized
and existing under the laws of the People's Republic of China (“PRC”) in 1998.
Harbin Yingxia is engaged in the development, manufacture and distribution of
organic nutritional food products and dietary supplements. Relying on the raw
materials produced in the soybean production base, green cactus production base
and organic millet production base, Yingxia produces and distributes hundreds of
serial products of high quality, high nutrition, and high added
value.




3





Our
Business




Overview
and Business Model




Through our wholly-owned subsidiary Yingxia, we engage in the development,
production, and sale of health food products, including soybean meals and
drinks, cactus based foods, rice products, and beauty cosmetics. Sales within
China comprise 100% of total revenue. Our sales in foreign nations
represent pilot programs that as of yet has not become full scale
operations.  Yingxia's health food products have a historical and cultural
background. One principle that runs through the over 6,000-year history of
Chinese medicine is "food and medicine come from a common source". For thousands
of years, Chinese people have been using selected foods to enhance health, cure
diseases, and achieve longevity. Recent western medical technology also confirms
that many Chinese medicines have various degrees of disease prevention and anti
aging effects.




We
have established a business model that includes research, planting, production,
deep processing, storage, and sales, which allows us to control all aspects of
the business, including the technology content of the product, supply of raw
material, quality of production and management of customer
relationships.




In total, we
have approximately 235 stock keeping units.  Approximately 63.45% of
our products are manufactured in-house. The balance of the products are
purchased wholesale and resold or manufactured by third party contracted
companies.


Our
Principal Products and Services




Our
products are divided into five (5) categories:




§
            Nutritional
      Food Products




§
            Dietary
      Supplements




§
            Cosmetic
      Products




§
            Raw
      cactus Plants




§
            Personal
      Care Products and Others




Nutritional
Food Products




The
Nutritional Food Products line include a variety foods including those certified
as organic by the China Green Food Development Center (“CGFDC”), the agency that
sets the organic food standards within China. The CGFDC was established in
November 1992, under the jurisdiction of the Chinese Ministry of
Agriculture. The organic products we sell are functional organic rice and
organic eggs. Among our non-organic foods, the top selling products are Long Gu
millet, dried noodles, soy milk and yogurt products, rice crackers and biscuits,
dried herbal mushrooms, Nestle products including powdered drinks and cereals,
and soybeans.  We manufacture all of these products in-house except
for the organic eggs and Nestle products.






4




Dietary
Supplements





The
Dietary Supplements line includes products with both traditional Chinese and
Western medicinal background. These products are used as preventative
nutraceuticals in pill or tablet form that protect against common ailments and
diseases. For example, our cactus based supplements contain amino acids along
with extracts of traditional Chinese herbs and is used to promote metabolism and
provide daily regularity. Among these products, we also include a line of herbal
teas infused with ginkgo and various other traditional Chinese herbals. These
herbal teas are manufactured by third parties while all the rest of the dietary
supplements products are made in-house.





Our top
selling dietary supplement products are the cactus based supplements, the
balsamic pear based supplements, protein supplements, Shepherd’s purse based
supplements, multi-vitamin supplements, and herbal teas.





Cosmetic
Products





The
cosmetic products are derived from cactus extracts and are used as skin creams
and moisturizers. These products manufactured in-house.





Raw
cactus Plants





The
      raw cactus plants line is comprised of packaged raw cactus slices that are
      sold for consumption. All


cactus
      are grown and processed in our greenhouse
  facilities.





Personal
Care and Other Products




The
personal care and other miscellaneous product line include mostly products which
we purchase direct from manufacturers for resale. These products include
adjustable showerheads, induction cookers, blood circulation machines, ozone
purifiers, pressure cookers, smokeless woks, and kitchen exhaust vent
hoods.




Distribution
Methods of the Products and Services




The
Company sells its products through the use of franchisee owned retail outlets.
These stores are categorized as by the provincial level, county level, and
township level. Provincial level stores are defined as large standalone stores
located in larger metropolitan cities. County level outlets are defined as
medium sized stores within department stores or shopping malls. Township level
franchises are the small kiosk and booth type outlets.




Our
franchisees are individuals or entities who sell our products. There is no
franchisee fee or term of service associated with becoming a franchisee. These
individuals do need to apply to become a franchisee. By reviewing their
entrepreneurial history and track record, we grant these individuals the ability
to sell our products. Therefore, we classify these individuals as franchisees as
compared to distributors.




5




Although
there is no franchisee fee, there is an initial minimum order requirement. For
the provincial level, the initial minimum order is 400,000 RMB or about $52,000
USD. For the county level, the initial
minimum order is 100,00 RMB or about $13,000 USD. For the county level, the
initial minimum order is 39,600 RMB or about $5,200 USD. Franchisees receive
greater discounts on their orders relative
to order size.


As of
December 31, 2007, the Company sold products through a total of 37 provincial
level franchises, 102 county level franchisees, and 861 township level
franchisees.




Competition





The
Company estimates the nutritional health food and supplement market will exceed
$12.5 billion by 2009. The industry on a whole is fragmented and primarily
consists of small to mid sized firms. With thousands of manufacturers and even
more types of products, no single company controls a 10% market share for the
country. Within provinces and cities, market shares are more concentrated, but
still divided among numerous firms. The Company through networks and contacts
developed over decades of doing business in the Harbin region, has gained wide
acclaim and brand loyalty. The Company enjoys competitive advantages of
operations size and manufacturing capacity. More than 60% of all firms in the
industry are small workshop-type operations with total net assets of less than
$5 million dollars, while only about 1.45% of the firms are comparable to the
Company, with net assets which exceed $15 million dollars.





To
compete in a fragmented market, the Company has engaged in various modes of
promotion and marketing of its products. It has used mainstream media channels
consisting of advertisements in newspapers, consumer and industry magazines, and
television demonstration and information shows.





Sources
and Availability of Raw Materials





Yingxia
has fully taken advantage of the valuable agriculture environment of the
Heilongjiang province, which produces 40% of the soybeans in China. The province
has an annual soybean output of over 5 million tons. Heilongjiang has 36 million
acres of “black soil” which enriched with nutrients and nitrogen compounds not
found in other regions of China. The “black soil” allows for the higher quality
harvest of millet and wheat. We plant and harvest the raw materials on our
facilities. In addition, the Company also purchases raw materials from local
farmers. Since the raw materials are bought from the farmers on an individual
basis, there is no reliance on a single entity or group for the Company’s raw
materials.





Dependence
on One or a Few Customers





We do not
depend on one or a few customers. Our customer base is a wide distribution of
clients which include regional distribution centers, franchise stores, and sales
agents. No single customer represents 5% or more of our revenues. A breakdown of
our customer base is as follows:





Region
            
            Active
      Franchisees
            
            Net
      SalesAs
      of
            
            As
      of
            
            As
      of
            
            As
      of12/31/2006
            
            12/31/2007
            
            12/31/2006
            
            12/31/2007Northeast
      China
            
            340
            
            391
            
            $5,583,490
            
            $9,534,011North
      China
            
            40
            
            128
            
            $541,810
            
            $1,456,525East
      China
            
            25
            
            105
            
            $420,086
            
            $1,030,743Northwestern
      China
            
            6
            
            30
            
            $180,820
            
            $494,498Southwestern
      China
            
            14
            
            60
            
            $355,248
            
            $688,995South
      Central China
            
            75
            
            286
            
            $1,320,257
            
            $2,707,546Total
            
            500
            
            1000
            
            $8,401,711
            
            $15,912,318








6





Northeastern
China includes Heilongjiang, Jilin, and Liaoning province. North China includes
the municipalities of Beijing, Tianjin, Qingdao, Xi’an, the provinces of Hebei
and Shanxi, Shandong, and Inner Mongolia Autonomous Region. East China includes
the provinces of Anhui, parts of Fujian, Jiangsu, Jiangxi, and Zhejiang, as well
as the municipality of Shanghai. Northwestern China includes the autonomous
regions of Xinjiang and Ningxia and the provinces of Shaanxi, Gansu, and
Qinghai.




Southwestern
China includes the municipality of Chongqing; provinces of Sichuan, Yunnan and
Guizhou; and the Tibet Autonomous Region. South Central China includes the
provinces of Henan, Hubei, Hunan, Guangdong and Hainan, and the Guangxi Zhuang
Autonomous Region.











Patents,
trademarks, licenses, franchises, concessions, royalty agreements, or labor
contracts.





We have
the following patent and trademark registrations, and copyrights, for our
products:





§
            Patent
      on the manufacturing method for general nutritional
      supplements:


Chinese
patent no.: ZL 01113870.X.


Granted
June 2, 2004; good for 20 years





§
            Patent
      for cactus based nutritional
drinks:


Chinese
patent no.: ZL 01113871.8


Granted
November 3, 2004: good for 20 years
  §
                  Patent
      on the ginseng based tea:
 Chinese patent no.: ZL99122507.4
 Granted October 30, 2002; good for 20 years


§
                Patent
      on functional organic rice strain W3660 Chinese patent no.: ZL02157240.2
 Granted July 1, 2003; good for 20 years


§
            Trademarks
      on China Yingxia including logos and use of
  name.





§
            Copyrights
      on product brand names.




Need
for Government Approval of Principal Products or Services





Since the
Company’s products are marketed as nutritional supplements sold as foods and not
medicines, the government regulation is minimal towards the approval to market
and sell the products. The Company sells some of its products including the Long
Gu millet and soybean based products under the “Green Food” label. This label is
approved by the State Farming Department to represent products of low pesticide
residue and integrated pest management systems. The “Green Food” label is a
distinction recognizing the Company’s products. The label is not required to
gain approval to manufacture or sell the products.





Effect
of Existing or Probable Government Regulations on Business





The
Company does not foresee any government regulation to interfere or affect the
course of operations in the near and immediate future.






7






Research
and Development




The
Company has internal research and development capabilities. The Company
developed the Cactus dry powder and deep process technology, Long Gu golden rice
and deep process technology, and MT corn, fruit and vegetable functional food
processing technology. The Company owns all of the intellectual property
rights.





The
Company also partners with Australian King International Co., Ltd, which owns a
patent in a leading soybean deep processing technology. The Company maintains
close cooperative relationship with research resource at such institutions as
Northeastern Agricultural University, Harbin Medical University, Heilongjiang
Traditional Chinese Medicine and Pharmacology University, the Chinese Academy of
Agricultural Sciences and Nanjing Agricultural University.





Notwithstanding
the aforesaid, the Company has spent $136,767 and $488,404 on R&D
expenditures for the years ended December 31, 2007 and 2006
respectively.





Cost
and Effects of Compliance with Environmental Laws





Through
the course of its operating history, the Company has complied with all
environmental regulations. These laws on a whole do not have a material effect
on the Company’s operations.




Employees





As of
December 31, 2007, we had 215 employees, 36 of which are administration and
management, 75 of which are manufacturing plant workers, 47 of which are farmers
and growers, and 50 of which are marketing and business development
representatives.




Item
2.    Description of Property




The
Company’s wholly owned facilities include office space, store fronts, storage
areas, manufacturing space, and workshops totaling 54,600 square meters located
in Harbin, Heilongjiang province of North China. For manufacturing purposes,
there is 16,300 square meters of space which include workshops dedicated to
soybean process, millet process and cactus process, and other
facilities.




Item
3.    Legal Proceedings




Neither
the Company nor any of its subsidiaries is a party to any pending or threatened
legal proceedings.




Item
4.    Submission of Matters to a Vote of Security
Holders




On June
11, 2007, the Company received written consents in lieu of a meeting of
stockholders from 3 stockholders holding 17,358,950 shares of Common stock
representing approximately 51.66% of the 33,608,857 outstanding shares of common
stock of the Company (i) approving an amendment to the Company's Bylaws
increasing the number of directors authorized to serve on the Board of Directors
up to nine (9) and providing that a majority of directors may amend the Bylaws;
and (ii) adopting the 2007 Equity Incentive Plan.






8






PART II




Item
5.    Market for Common Equity and Related Stockholder
Matters






Market
Information





Our
Common Stock is currently quoted on the OTCBB under the symbol “CYXI”. There is
a limited trading market for our Common Stock. The following table sets forth
the range of high and low bid quotations for each quarter within the last two
fiscal years and the subsequent interim period. These quotations as reported by
the OTCBB reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not necessarily represent actual transactions.




Closing
      BidYEAR
      2006
            High
      Bid
            Low
      Bid1st
      Quarter Ended March 31*
            $2.24
            $0.892nd
      Quarter Ended June 30*
            $2.36
            $1.243rd
      Quarter Ended September 30*
            $2.02
            $1.514th
      Quarter Ended December 31
            $2.00
            $1.02YEAR
      2007
            High
      Bid
            Low
      Bid1st
      Quarter Ended March 31
            $2.15
            $1.742nd
      Quarter Ended June 30
            $2.99
            $1.793rd
      Quarter Ended September 30
            $3.38
            $1.904th
      Quarter Ended December 31
            $3.20
            $1.31YEAR
      2008
            High
      Bid
            Low
      BidPeriod
      Ended March 28
            $1.74
            $0.67


*
Adjusted for the 1:24.9 reverse split effected on July of
2006.




Holders




As of
March 28, 2008 in accordance with our transfer agent records, we had 1411 record
holders of our Common Stock, holding 44,479,626 shares.





Dividends




Holders of our common stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefore.
Although we paid dividends on our common stock in 2005 when we were a private
company, we do not anticipate declaring any further dividends in the foreseeable
future. We intend to retain any future earnings for use in the operation and
expansion of our business. Consequently, we do not anticipate paying any cash
dividends on our common stock to our stockholders for the foreseeable
future.




As
the Company has already obtained its Wholly Foreign Owned Entity (WFOE)
certificate, it is not regulated by the government restrictions related to the
free movement of the Chinese currency.  Therefore, the Company is not
restricted in moving funds out of China to pay dividends. However, as the
Company foresees using future earnings for working capital and expansion of its
business, it does not anticipate the payment of cash dividends in the near
future.




Recent Sales of Unregistered
Securities





On July 16, 2007 China Yingxia completed the sale of 1,000,000
Units of securities to a total of 3 investors. Each "Unit" included two shares
of common stock and one common stock purchase warrants exercisable at $1.50.The
sale of the Units was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Act, because each of the
investors was an Accredited Investor and there was no advertising or public
solicitation performed in connection with the offering. The sale of the Units
was also exempt from registration pursuant to Rule 506 of the Securities and
Exchange Commission, since the sales satisfied all of the conditions specified
in SEC Rules 501 and 502 and each of the investors had such knowledge and
experience in financial and business matters that the investor was capable of
evaluating the merits and risks of the investment.






9







On August
9, 2007 China Yingxia International, Inc. completed the sale of 34.90052 Units
of securities to a total of twenty investors. Each Unit consisted of 250,000
shares of common stock and warrants to purchase 125,000 shares of common stock,
exercisable at $2.00 per share. The sale of the Units was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Act, because each of the investors was an Accredited Investor and there was no
advertising or public solicitation performed in connection with the offering.
The sale of the Units was also exempt from registration pursuant to Regulation
D, Rule 506 of the Securities and Exchange Commission, since the sales satisfied
all of the conditions specified in SEC Rules 501 and 502 and each of the
investors had such knowledge and experience in financial and business matters
that the investor was capable of evaluating the merits and risks of the
investment.







Equity Compensation Plan
Information





None.





Item
      6.
            Management’s
      Discussion and Analysis or Plan of
Operations.





The
following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Form 10-KSB.
The following discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
prospectus. Although management believes that the assumptions made and
expectations reflected in the forward-looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual results will not be different from expectations expressed
in this report.





Results of
Operations





For
the Fiscal Year Ended December 31, 2007 as Compared to the Fiscal Year Ended
December 31, 2006





The
following table sets forth the amounts and the percentage relationship to
revenues of certain items in our consolidated statements of income for the years
ended December 31, 2007 and 2006:




2007
                  
                  
                  2006Sales
                  
                  $
                  15,912,318
                  
                  
                  $
                  8,401,711Cost
      of Sales
                  
                  
                  6,771,252
                  
                  
                  
                  3,835,017Gross
      Profit
                  
                  
                  9,141,067
                  
                  
                  
                  4,566,694Operating
      ExpensesResearch
      & Development Expense
                  
                  
                  136,767
                  
                  
                  
                  488,404Selling,
      general and administrative
                  
                  
                  2,920,694
                  
                  
                  
                  1,739,221Income
      before other Income and (Expenses)
                  
                  
                  6,083,605
                  
                  
                  
                  2,339,069Other
      Income and (Expenses)Subsidy
      Income
                  
                  
                  32,877
                  
                  
                  
                  -Interest
      Income
                  
                  
                  3,216
                  
                  
                  
                  431Other  Income
                  
                  
                  -
                  
                  
                  
                  138Other
      Expense
                  
                  
                  (484
                  )
                  
                  
                  (176
                  )Other
      Income and Expenses Total
      Other Income and (Expenses)
                  
                  
                  35,608
                  
                  
                  
                  393Income
      Before Income Taxes (Benefits)
                  
                  
                  6,119,214
                  
                  
                  
                  2,339,462Provision
      for Income Taxes (Benefits)
                  
                  
                  -
                  
                  
                  
                  (3,000,795
                  )Net
      Income
                  
                  $
                  6,119,214
                  
                  
                  $
                  5,340,257Other
      Comprehensive IncomeForeign
      Currency Translation Adjustment
                  
                  $
                  1,956,330
                  
                  
                  
                  568,889Comprehensive
      Income
                  
                  $
                  8,075,544
                  
                  
                  $
                  5,909,146Basic
      and Diluted Income per common shareBasic
                  
                  $
                  0.16
                  
                  
                  $
                  0.33Diluted
                  
                  $
                  0.15
                  
                  
                  $
                  0.33Weighted
      average common share outstandingBasic
                  
                  
                  37,995,417
                  
                  
                  
                  17,157,810Diluted
                  
                  
                  40,176,812
                  
                  
                  
                  17,157,810





Revenues





Revenues
for the year ended 2007 totaled $15,912,318, an increase of $7,510,607 or 89.4%
over revenues for the year ended 2006 of $8,401,711.





A
breakdown of sales by product categories and as a percentage of total sales is
listed below:








10








Percentage
      of 2006 Total Sales
            
            Percentage
      of 2007 Total SalesNutritional
      Foods
            $457,844
            5.45%
            $2,152,812
            13.53%Dietary
      Supplements
            $1,721,026
            20.49%
            $3,431,914
            21.56%Cosmetic
      Products
            $69,132
            0.82%
            $772,370
            4.85%Raw
      cactus plants
            $5,816,960
            69.23%
            $6,095,632
            38.31%Personal
      care and other products
            $336,749
            4.01%
            $3,459,590
            21.75%Total
            $8,401,711
            
            $15,912,318








Notable
products are as follows:





Revenue
            
            
            Percentage
      of Nutritional Foods SalesNutritional
      FoodsFunctional
      Organic Rice
            
            $
            201,546
            
            
            
            9.36
            %Soy
      Milk
            
            $
            202,483
            
            
            
            9.41
            %Long
      Gu Millet
            
            $
            135,327
            
            
            
            6.29
            %Dried
      noodles
            
            $
            343,729
            
            
            
            15.97
            %Rice
      Crackers and biscuits
            
            $
            158,051
            
            
            
            7.34
            %Dried
      herbal mushrooms
            
            $
            147,738
            
            
            
            6.86
            %Organic
      eggs
            
            $
            398,213
            
            
            
            18.50
            %Nestle
      products
            
            $
            129,359
            
            
            
            6.01
            %Milk
            
            $
            121,794
            
            
            
            5.66
            %Soybeans
            
            $
            166,200
            
            
            
            7.72
            %








Dietary
      Supplements
            
            Revenue
            
            
            Percentage
      of Dietary Supplements SalesCactus
      based supplements
            
            $
            308,177
            
            
            
            8.98
            %Balsamic
      pear based supplements
            
            $
            127,395
            
            
            
            3.71
            %Protein
      supplements
            
            $
            152,894
            
            
            
            4.46
            %Shepherd's
      purse based supplements
            
            $
            226,783
            
            
            
            6.61
            %Multi-vitamin
      supplements
            
            $
            128,053
            
            
            
            3.73
            %Organic
      teas
            
            $
            846,622
            
            
            
            24.67
            %Freeze
      dried cactus powder
            
            $
            464,986
            
            
            
            13.55
            %








Personal
      care and Other Products
            
            Revenue
            
            
            Percentage
      of Personal Care and Others SalesShowerheads
            
            $
            460,467
            
            
            
            13.31
            %Induction
      cooker
            
            $
            746,791
            
            
            
            21.59
            %Blood
      circulation machine
            
            $
            152,855
            
            
            
            4.42
            %Ozone
      purifiers
            
            $
            178,632
            
            
            
            5.16
            %Pressure
      cookers
            
            $
            611,111
            
            
            
            17.66
            %Smokeless
      woks
            
            $
            525,586
            
            
            
            15.19
            %Kitchen
      exhaust vent hoods
            
            $
            157,340
            
            
            
            4.55
            %









11





While raw
cactus plants which accounts for 38.31% of total revenue still remains the top
selling product line, the Company has significantly diversified the
concentration of its product mix to other product lines including dietary
supplements, personal care and other products, and nutritional food products
which account for 21.56%, 21.75% and 13.53% of total revenue
respectively.





The 89.4%
year-over-year increase in sales was driven by the introduction of new products
and the increase in number of total active franchisees.





The
nutritional food product line contributed approximately $2,152,812 to total
revenues and represents 22.56% of total growth. The personal care and others
product line contributed approximately $3,459,590 to total revenues and
represents 41.58% of total growth. The dietary supplements product line
contributed approximately $3,431,914 to total revenues and represents 22.78% of
total growth.








Gross
Profit




The
Company achieved a gross profit of $9,141,067 in 2007 compared to $4,566,694 in
2006, representing a 100.17% increase year-over-year and a direct result of the
89.4% increase in sales and improved product mix margins. A breakdown of gross
margins by product line year-over-year is as follows:





Gross
      Margins2006
            
            
            2007Nutritional
      Foods
            
            
            24.99
            %
            
            
            44.46
            %Dietary
      Supplements
            
            
            48.00
            %
            
            
            59.09
            %Cosmetic
      Products
            
            
            71.41
            %
            
            
            76.37
            %Raw
      cactus plants
            
            
            58.45
            %
            
            
            61.95
            %Personal
      Care & Others Products
            
            
            40.00
            %
            
            
            70.91
            %Overall
            
            
            54.35
            %
            
            
            57.45
            %





We expect
to continue to introduce new products within our existing segments and expect
gross margins to remain relatively stable going forward.








Operating
Expenses





Our total
operating expenses consists mostly of selling, general and administrative costs
(SG&A) and a small portion on research and development (R&D). SG&A
accounts for expenses associated with sales and  marketing of our
products including advertising and travel, costs of maintaining our
manufacturing facilities, salaries, and costs associated with being a public
company including legal, audit, investor relations.






12





A
breakdown of major operating expenses year on year is as
follows:




Operating
      Expenses
              
              2006
              
              
              2007Salary
      expenses
              
              $
              100,550
              
              
              $
              186,167Advertising
      expenses
              
              $
              151,470
              
              
              $
              228,441Business
      travel & entertainment expenses
              
              $
              99,101
              
              
              $
              185,742Manufacturing
      facilities upkeep expenses
              
              $
              15,792
              
              
              $
              62,638Legal
      and Audit fees
              
              $
              70,075
              
              
              $
              121,569Going
      Public expense
              
              $
              850,000
              
              
              $
              0Investor
      relations expense
              
              $
              0
              
              
              $
              77,500Directors’
      and Officers’ insurance expense
              
              $
              0
              
              
              $
              20,200Research
      & Development expenses
              
              $
              488,404
              
              
              $
              136,767Stock
      issuance expense for consultants
              
              $
              0
              
              
              $
              212,744Allowance
      for doubtful accounts related to related party loans
              
              $
              0
              
              
              $
              347,702
  The Company
incurred total operating expenses of $3,057,461in 2007, compared to $2,227,625
in 2006.
 This
represents an increase of $829,836 or 37.25%, year-over-year. This increase is
primarily due to the higher SG&A expenses listed above.
  SG&A
expenses amounted to $2,920,694 or 18.4% of total sales in 2007 compared to
$1,739,221or 20.7% of total sales in 2006. If we normalize for the one time
$850,000 fee of going public, our SG&A expense for 2006 becomes $889,221 or
10.6% of total sales. The year-over-year increase is primarily due to higher
costs related to marketing our brand and products as a result of increased
sales.  Additionally, higher consulting, legal, directors’ and
officers’ insurance and auditing expenses totaling approximately $432,013
contributed to the increase in SG&A expenses. Lastly, we recorded an
allowance for doubtful accounts in the amount of $347,702.
  Operating
Profit
  We achieved
a 160.08% year-over-year growth in operating profit, which was $6,083,605 in
2007 compared to $2,339,069 in 2006.
  The sizeable
growth in operating profit is primarily attributable to our sales growth.
Operating margin for 2007 was 38.23%, up from 27.89% in 2006. This reflects the
improved operating efficiency and product diversification.
  13
  Net
Income
  Net Income
for 2007 was $6,119,214 compared to $5,340,257 for 2006.
  Net income
for 2006 includes a one time income tax benefit we received as a result of
achieving WOFE status. The tax benefit represented $3,000,795 or 56.19% of our
total net income for 2006.
  Excluding
the income tax provision and normalizing for the going public expense, net
income in 2006 was $3,189,462. Using this net income figure for 2006 and net
income of $6,119,214 in 2007, we achieved a 91.86% year-over-year growth. This
increase in net income was mainly due to sales to new franchisees and new
products.
  LIQUIDITY
AND CAPITAL RESOURCES
  As of
December 31, 2007, cash and cash equivalents totaled $736,683, compared to
$77,867 on December 31, 2006, representing a net increase in cash and cash
equivalent of $658,816. The increase was mainly attributable to the increase in
our collection of account receivables and other receivables.
  The Company
had net cash flows used in operations of $1,225,372 for the year ended December
31, 2007, as compared to net cash provided by operations of $8,424,577 for the
year ended December 31, 2006.
  This
variance is mainly to inventory and other receivables.
  Cash
used ininventory increased friom
$929,194in
2006to $4,415,033in
2007 primarily as a result of increased spending on raw materials
and finished goods. A breakdown of inventory at December 31, 2007 is as
follows:
 
 Packaging
      materials
              $102,707Raw
      materials (including soybeans and organic rice materials)
              $2,660,601Work
      in process
              $210,864Finished
      goods
              $2,552,963
  Cash used
in other creceivables increased to $2,804,002 in 2007
  Cash flows
used in investing activities were $8,142,669 in the year ended December 31, 2007
compared with a net usage of $8,800,779 in the corresponding period last year.
In 2006, we incurred $1,937,126 and $3,798,973 in the purchase of property and
equipment and additions to construction in process related to the building of
our headquarters and manufacturing facilities. In 2007, our significant
investments were related to a $4,112,631 investment advance, a $2,194,774 short
term loan, and $1,718,077 in deposits on buildings and land.
  14
  In August
2007, the Company made a short tem loan of $2,194,774 to the agriculture
production base in Hulan county, Helongjiang Province to help finance the well
sinker and irrigation project due to an unexpected severe drought in the
northern part of China during the summer of 2007. The purpose of the loan was to
support the farmers in order to prevent any further damage to their harvest and
to secure the raw materials for the Company’s own production. The loan was
intended to be interest free and for a short-term period from August 2007 to
March 2008. The management expects the entire loan to be repaid by the end of
March 2008.
  On December
5, 2007, the Company (“Buyer”) signed an agreement (“Agreement”) with Shanghai
Jin Ao Food Co., Ltd. (“Seller”) to purchase its six (6) Soybean Milk production
lines for a total of $4,112,631, including production equipments, technique
know-how and marketing resources. The Agreement calls for the Company (“Buyer”)
to make three installment payments of the full purchase price before January 31,
2008. Once the payments are made in full, the Seller will transfer the ownership
of the equipments and all related resources to the Buyer. As of December 31,
2007, the Company made all three installment payments and recorded the entire
amount as investment advance since the transaction has not been completed yet.
Upon closing of this transaction, the Company will reclassify the amount to
fixed assets and other related accounts.
  The Company
made separate deposits in the total amount of RMB12,532,685 (approximately US$
1.7 million) on one building in Harbin, one office space in Beijing and a piece
of land in Anhui Province it intends to purchase. All purchases are evidenced by
purchase agreements and the transactions were not finalized as of December 31,
2007. Once the Company completes the title transfers, the deposits will be
reclassified to Property, Plant and Equipment account.
   Cash
flows provided by financing activities were $9,272,876 for the year ended
December 31, 2007 as a result of proceeds received from the issuance of common
stock.
  On
July 16, 2007, the Company entered into a stock subscription and warrant
agreement, (“Subscription Agreement”), with three (3) accredited investors.
Pursuant to the Subscription Agreement, the investors purchased 1,000,000 units,
each unit consisting of (a) two shares of common stock and (b) one common stock
purchase warrant, at a purchase price of $2.00 per unit. The Company received
net proceeds of $1,980,000 in connection with this private
placement.
  With
the warrants attached to the units sold in the private placement, the investors
are entitled to purchase an aggregate of 1,000,000 shares of common stock at an
exercise price of $1.50 per share. All these warrants are exercisable for five
years from the effective date of registration statement.
  Upon
completion of the placement, the Company incurred approximately $20,000 in legal
and other expenses.
  On
August 9, 2007, the Company completed another private placement of its
securities to accredited investors pursuant to Regulation D under the Securities
Act of 1933, as amended. The Company entered into a stock subscription agreement
and warrant agreement (“Subscription Agreement”), with twenty (20) accredited
investors. Pursuant to the Subscription Agreement, the investors purchased
34.90052 units, each unit consisting of (a) 250,000 shares of common stock and
(b) a 5-year stock purchase warrant to purchase 125,000 shares of common stock
exercisable at $2.00 per share. The units were sold for a price of $250,000 per
unit, yielding gross proceeds of $8,725,130 from the sale of the units. The
Company paid fees and commissions in the aggregate amount of $1,398,387 in
connection with this offering.
 
 15








CHINA
YINGXIA INTERNATIONAL, INC.
 
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 DECEMBER
31, 2007
 
    16
 CHINA
YINGXIA INTERNATIONAL, INC.
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheet at December 31, 2007
              F-3Consolidated
      Statements of Income for the years ended December 31, 2007 and
      2006
              F-4Consolidated
      Statements of Changes in Stockholders’ Equity for the years ended December
      31, 2007 and 2006
              F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2007 and
      2006
              F-6Notes
      to Consolidated Financial Statements
              F-7
      - F-22
 
 
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Stockholders
 China
Yingxia International, Inc.
 Harbin,
PRC
 
 We have
audited the accompanying consolidated balance sheet of China Yingxia
International, Inc., as of December 31, 2007 and the related statements of
income, changes in stockholders’ equity, and cash flows for each of the two
years ended December 31, 2007 and 2006.  These consolidated financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with standards established by the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of China Yingxia International,
Inc., as of December 31, 2007 and the results of its operations, changes in
stockholders’ equity, and cash flows for each of the two years then ended
December 31, 2007 and 2006 in conformity with accounting principles generally
accepted in the United States of America.
  Bagell
Josephs, Levine & Company, LLC
 Bagell
Josephs, Levine & Company, LLC
 Marlton,
New Jersey
 
 
 March 17,
2008
 
 F-2
  CHINA
YINGXIA INTERNATIONAL, INC.
 CONSOLIDATED
BALANCE SHEET
 DECEMBER
31, 2007
  
 ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              736,683Account
      receivables, net of allowance for doubtful accounts
              
              
              20,081Inventory
              
              
              5,527,135Tax
      Receivable
              
              
              32,317Short-term
      loan receivable
              
              
              2,194,774Other
      receivables
              
              
              3,150,777Advances
      to suppliers
              
              
              1,434,059Loan
      Receivable from related parties,net of allowance for doubtful
      accounts
              
              
              2,037,551Total
      Current Assets
              
              
              15,133,377Property
      and equipment, net of accumulated depreciationof
      $3,371,764
              
              
              15,515,896Other
      AssetsDeposits
      on buildings and land
              
              
              1,718,077Investment
      Advance
              
              
              4,112,631Intangible
      assets, net
              
              
              666,785Total
      other assets
              
              
              6,497,493Total
      Assets
              
              $
              37,146,766LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
              
              $
              2,911Unearned
      revenue
              
              
              6,509Accrued
      expenses and other payables
              
              
              357,976Total
      Current Liabilities
              
              
              367,396Total
      Liabilities
              
              
              367,396Stockholders'
      EquityPreferred
      stock, $0.001 par value, 10,000,000 shares authroized; - 0 -
      sharesoutstanding
      at  December 31, 2007
              
              
              -Common
      stock, $0.001 par value, 100,000,000 shares authorized;44,439,787
      shares outstanding at December 31, 2007
              
              
              44,440Additional
      paid in capital
              
              
              16,799,667Accumulated
      other comprehensive income
              
              
              2,885,038Statutory
      reserves
              
              
              901,463Retained
      earnings
              
              
              16,148,762Total
      Stockholders' Equity
              
              
              36,779,370Total
      Liabilities and Stockholders' Equity
              
              $
              37,146,766
  See
accompanying notes to the consolidated financial statements.
  F-3
  CHINA
YINGXIA INTERNATIONAL, INC.
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR
THE YEARS ENDED DECEMBER 31,
  
 2007
              
              
              2006Sales
              
              $
              15,912,318
              
              
              $
              8,401,711Cost
      of Sales
              
              
              6,771,252
              
              
              
              3,835,017Gross
      Profit
              
              
              9,141,067
              
              
              
              4,566,694Operating
      ExpensesResearch
      & Development Expense
              
              
              136,767
              
              
              
              488,404Selling,
      general and administrative
              
              
              2,920,694
              
              
              
              1,739,221Income
      before other Income and (Expenses)
              
              
              6,083,605
              
              
              
              2,339,069Other
      Income and (Expenses)Subsidy
      Income
              
              
              32,877
              
              
              
              -Interest
      Income
              
              
              3,216
              
              
              
              431Other  Income
              
              
              -
              
              
              
              138Other
      Expense
              
              
              (484
              )
              
              
              (176
              )Other
      Income and Expenses Total Other Income and (Expenses)
              
              
              35,608
              
              
              
              393Income
      Before Income Taxes (Benefits)
              
              
              6,119,214
              
              
              
              2,339,462Provision
      for Income Taxes (Benefits)
              
              
              -
              
              
              
              (3,000,795
              )Net
      Income
              
              $
              6,119,214
              
              
              $
              5,340,257Other
      Comprehensive IncomeForeign
      Currency Translation Adjustment
              
              $
              1,956,330
              
              
              
              568,889Comprehensive
      Income
              
              $
              8,075,544
              
              
              $
              5,909,146Basic
      and Diluted Income per common shareBasic
              
              $
              0.16
              
              
              $
              0.33Diluted
              
              $
              0.15
              
              
              $
              0.33Weighted
      average common share outstandingBasic
              
              
              37,995,417
              
              
              
              17,157,810Diluted
              
              
              40,176,812
              
              
              
              17,157,810
  See
accompanying notes to the consolidated financial statements.
  F-4
  CHINA
YINGXIA INTERNATIONAL, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2007 and 2006
  
 Preferred
      Stock
              
              
              Common
      Stock
              
              
              Additonal
              
              
              Accumulated
      Other Comprehensive
              
              
              Statutory
              
              
              Retained
      Earnings
              
              
              Total
      Stockholders'Par
      value $0.001
              
              
              Par
      value $0.001Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Paid-in
      Capital
              
              
              Income
              
              
              Reserve
              
              
              Unapprorpiated
              
              
              EquityBalance,
      January 1,2006
              
              
              59,183
              
              
              
              59
              
              
              
              4,016,064
              
              
              $
              4,016
              
              
              $
              7,354,196
              
              
              $
              359,819
              
              
              $
              854,152
              
              
              $
              4,689,291
              
              
              $
              13,261,533Conversion
      of Preferred Stock
              
              
              (59,183
              )
              
              
              -59
              
              
              
              29,592,793
              
              
              
              29,593
              
              
              
              (29,424
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              110Additional
      Capital Contributed
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Comprehensive
      Income-Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,340,257
              
              
              $
              5,340,257-Other
      Comprehensive Income, net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              --Foreign
      Currency Translation Adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              568,889
              
              
              
              
              
              
              
              
              
              
              $
              568,889Total
      Comprehensive IncomeAdjsutment
      to Statutory Reverve
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              47,311
              
              
              
              
              
              
              $
              47,311Balance,
      December 31,2006
              
              
              -
              
              
              
              -
              
              
              
              33,608,857
              
              
              $
              33,609
              
              
              $
              7,324,772
              
              
              $
              928,708
              
              
              $
              901,463
              
              
              $
              10,029,548
              
              
              $
              19,218,100Issuance
      of common stock for financing
              
              
              
              
              
              
              
              10,725,130
              
              
              
              10,725
              
              
              
              9,262,151
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              9,272,876Issuance
      of common stock for consulting services
              
              
              
              105,800
              
              
              
              106
              
              
              
              212,744
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              212,850Comprehensive
      Income-Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,119,214
              
              
              
              6,119,214-Other
      Comprehensive Income, net of tax-Foreign
      Currency Translation Adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,956,330
              
              
              
              
              
              
              
              
              
              
              
              1,956,330Total
      Comprehensive IncomeBalance,
      December 31,2007
              
              
              -
              
              
              
              -
              
              
              
              44,439,787
              
              
              $
              44,440
              
              
              $
              16,799,667
              
              
              $
              2,885,038
              
              
              $
              901,463
              
              
              $
              16,148,762
              
              
              $
              36,779,370
  See
accompanying notes to the consolidated financial statements.
  F-5
  CHINA
YINGXIA INTERNATIONAL, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 and 2006
  
 2007
              
              
              2006Cash
      Flows From Operating Activities:Net
      income
              
              $
              6,119,214
              
              
              $
              5,340,257Adjustments
      to reconcile net income to net cashprovided
      by (used in) operating activities:Depreciation
      and amortization
              
              
              814,831
              
              
              
              542,807Allowance
      for doubtful accounts
              
              
              347,439
              
              
              
              -Amortization
      of stock compensation for consulting servicesChanges
      in operating assets and liabilities:Accounts
      receivable
              
              
              (32,459
              )
              
              
              675,403Inventory
              
              
              (4,415,033
              )
              
              
              (929,194
              )Tax
      Receivable
              
              
              (32,317
              )
              
              
              -Prepaid
      expenses
              
              
              95,479
              
              
              
              (91,457
              )Other
      receivable
              
              
              (2,804,002
              )
              
              
              2,759,017Advances
      to suppliers
              
              
              (988,804
              )
              
              
              3,510,157Accounts
      payable
              
              
              (346,588
              )
              
              
              (150,335
              )Unearned
      revenue
              
              
              6,509
              
              
              
              -Taxes
      payable
              
              
              -
              
              
              
              (2,934,115
              )Accrued
      expenses and other payables
              
              
              (202,489
              )
              
              
              (297,963
              )Cash
      provided by (used in) operating activities
              
              
              (1,225,372
              
              
              
              8,424,577Cash
      Flows From Investing Activities:Purchase
      of property and equipment
              
              
              (290,126
              )
              
              
              (1,937,126
              )Purchase
      of patent
              
              
              (362,040
              )
              
              
              (300,081
              )Investment
      Advance
              
              
              (4,112,631
              )Advance
      to affiliate
              
              
              -
              
              
              
              (2,764,599
              )Short
      term loan
              
              
              (2,194,774
              )
              
              
              -Deposits
      on buildings and land
              
              
              (1,718,077
              )
              
              
              -Collections
      on loans to related party
              
              
              534,979
              
              
              
              -Additions
      to construction in process
              
              
              -
              
              
              
              (3,798,973
              )Cash
      used in investing activities
              
              
              (8,142,669
              )
              
              
              (8,800,779
              )Cash
      Flows From Financing Activities:Net
      proceeds from issuance of common stock
              
              
              9,272,876
              
              
              
              -Payment
      of notes payable
              
              
              -
              
              
              
              (210,652
              )Cash
      provided by (used in) financing activities
              
              
              9,272,876
              
              
              
              (210,652
              )Effect
      of exchange rate changes on cash and cash equivalents
              
              
              753,982
              
              
              
              629,818Increase
      in cash and cash equivalents
              
              
              658,816
              
              
              
              42,964Cash
      and Cash Equivalents - Beginning of year
              
              
              77,867
              
              
              
              34,903Cash
      and Cash Equivalents - End of year
              
              $
              736,683
              
              
              $
              77,867Supplemental
      disclosures of cash flow information:1
      Interest paid
              
              $
              -
              
              
              $
              -2
      Income Taxes paid
              
              $
              -
              
              
              $
              -NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Common
      stock issued for consulting services
              
              $
              212,850
              
              
              $
              -
  See
accompanying notes to the consolidated financial statements.
  F-6
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  1.  ORGANIZATION
AND DESCRIPTION OF BUSINESS
 
 China
Yingxia International, Inc. (the “Company” or “China Yingxia”) was incorporated
in the State of Florida on May 6, 1996 and formerly known as Agronix, Inc.
(“Agronix”).
  On May
12, 2006, the Company entered into a share exchange agreement with Warner
Nutraceutical International, Inc. (‘WNI”), which is the parent company to Harbin
Yingxia Business Group Co, Ltd. ("Yingxia"). Pursuant to the share exchange
agreement, the Company issued to WNI shareholders 54,811,475 shares of Common
Stock, par value $0.001 per share, and 1,473,649.074 shares of Class A Preferred
Stock, par value $0.001 per share, of which each share is convertible into five
hundred (500) shares of the Company’s Common Stock. As a result of the
transactions, there has been a change in control of the Company as the
shareholders of WNI became the majority shareholders of the
Company.
   For
accounting purpose, the transaction has been accounted for as a reverse
acquisition under the purchase method. Accordingly, WNI and its subsidiary are
treated as the continuing entity for accounting purposes. Following the merger,
Agronix filed a Certificate of Amendment and changed its name to China Yingxia
International, Inc.
   On July
21, 2006, the Company’s board of directors approved a reverse stock spilt on
both common stock and preferred stock.  Each 24.9 shares of the
Company's Common Stock and Class A Preferred Stock were converted into one (1)
share of Common Stock and one (1) share of Class A Preferred Stock,
respectively. Simultaneously, all of the preferred shares were converted into
common shares at ration of 1 to 500 and the preferred shares were
cancelled.
   The
Company operates its business through its wholly-owned subsidiary Harbin Yingxia
Business Group, Ltd. (" Harbin Yingxia"), a joint stock corporation organized
and existing under the laws of the People's Republic of China (“PRC”) in 1998.
Harbin Yingxia is engaged in the development, manufacture and distribution of
organic nutritional food products and dietary supplements. Relying on the raw
materials produced in the soybean production base, green cactus production base
and organic millet production base, Yingxia produces and distributes hundreds of
serial products of high quality, high nutrition, and high added
value.
  F-7
 
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
   Basis
of presentation
   The
Company’s consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America
(“US GAAP”). This basis of accounting differs in certain material respects from
that used for the preparation of the books of account of the Company’s principal
subsidiary, which are prepared in accordance with the accounting principles and
the relevant financial regulations applicable to enterprises with limited
liabilities established in the PRC, the accounting standards used in the places
of their domicile.  The accompanying consolidated financial statements
reflect necessary adjustments not recorded in the books of account of the
Company’s subsidiary to present them in conformity with US GAAP.
  Principles
of consolidation
 
 The
consolidated financial statements of China Yingxia International, Inc. include
the accounts of the Company and its wholly owned subsidiaries, WNI and Harbin
Yingxia.  All significant inter-company balances and transactions are
eliminated in consolidation.
 
 Use
of estimates
 
 In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting year. Significant estimates, required by management, include the
recoverability of long-lived assets and the valuation of
inventories.  Actual results could differ from those
estimates.
 
 Cash
and cash equivalents
 
 For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
  F-8
 
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Accounts
receivables
 
 Accounts
receivables are stated at net realizable value. This value includes an
appropriate allowance for estimated uncollectible accounts. The allowance is
calculated based upon the evaluation and the level of past due accounts and the
relationship with and the economic status of the customers.  The
allowance for doubtful accounts was $213,664 and $191,971 as of December 31,
2007 and 2006, respectively. The Company does not maintain a large balance of
accounts receivable due to the nature of its business, and the collections on
the Company’s accounts receivable has been generally good. Except for the above
reserved allowance, the Company has not encountered any uncollected accounts
receivable.
 
 Inventories
 
 Inventories
are composed of raw materials and packing materials for manufacturing, work in
process, and finished goods. Inventories are valued at the lower of cost or
market with cost determined on a first-in first-out basis. Management compares
the cost of inventory with the market value and an allowance is made for writing
down the inventory to its market value, if lower than cost.
 
 Property
and equipment
 
 Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation
is computed using the straight-line method over the estimated useful lives as
below:
  Category
              Estimated
      Useful LivesMachinery
      & Equipment
              4-5    yearsAutomobiles
              7       yearsBuildings
              15-40
      years
 
 Advance
to suppliers
 
 Advance
to suppliers represent the payments made and recorded in advance for goods and
services received. The Company makes advances to certain vendors’ inventory
purchases, construction projects and equipment purchases. The advance to
suppliers totaled $1,434,059 as of December 31, 2007.
  F-9
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Impairment
of long-lived assets
   Long-lived
assets, which include property, plant and equipment and intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
  Recoverability
of long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset.   If the carrying amount
of an asset exceeds its estimated undiscounted future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the assets.  Fair value is generally
determined using the asset’s expected future discounted cash flows or market
value, if readily determinable.
  Income
taxes
 
 The
Company accounts for income tax under the provisions of SFAS No.109 "Accounting
for Income Taxes", which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of the events that have
been included in the financial statements or tax returns.  Deferred
income taxes are recognized for all significant temporary differences between
tax and financial statements bases of assets and
liabilities.  Valuation allowances are established against net
deferred tax assets when it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
 
 The
Company does not have any long-term deferred tax assets or liabilities in China
that will exist once the tax holiday (See Note 11) expires. The Company does not
have any significant deferred tax asset or liabilities that relate to tax
jurisdictions not covered by the tax holiday.
 
 Revenue
recognition
  The
Company recognizes revenue on product sales when products are delivered and the
title passes to the customers and collection is reasonably assured.
  Cost
of revenues
  Cost of
revenues consists primarily of material costs, employee compensation,
depreciation and related expenses, which are directly attributable to the
production of products.  Write-down of inventory to lower of cost or market
is also recorded in cost of revenues.
  F-10
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Stock-based
compensation
 
 Effective
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-Based Payments,” which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No. 123(R), stock-based
compensation is measured at the grant date, based on the calculated fair value
of the award. And it is recognized as an expense over the requisite employee
service period (generally the vesting period of the grant).
 
 The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.  The fair value of the option
issued is used to measure the transaction, as this is more reliable than the
fair value of the services received.  Fair value is measured as the
value of the Company’s common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s
performance is complete.  The fair value of the equity instrument is
charged directly to compensation expense and additional paid-in
capital.
  Concentration
of credit risk
 
 Financial
instruments that potentially subject the Company to concentration of credit risk
consist primarily of accounts receivable and other receivables.  The
Company does not require collateral or other security to support these
receivables.  The Company conducts periodic reviews of its clients'
financial condition and customer payment practices to minimize collection risk
on accounts receivable.
 
 The
operations of the Company are located in the PRC. Accordingly, the Company's
business, financial condition, and results of operations may be influenced by
the political, economic, and legal environments in the PRC, as well as by the
general state of the PRC economy.
 
 Fair
value of financial instruments
 
 The
carrying amounts of certain financial instruments, including cash and cash
equivalents, accounts receivable, other receivables, accounts payable, accrued
expenses, taxes payable, notes payable and other loans payable approximate fair
value due to the short-term nature of these items.  The carrying
amounts of bank borrowings approximate the fair value based on the Company's
expected borrowing rate for debt with similar remaining maturities and
comparable risk.
  F-11
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
  
  2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Foreign
currency translation
  The
Company’s functional currency is the Renminbi (“RMB”). For financial reporting
purposes, RMB has been translated into United States dollars ("USD") as the
reporting currency. Assets and liabilities are translated at the exchange rate
in effect at the balance sheet date. Revenues and expenses are translated at the
average rate of exchange prevailing during the reporting period. Translation
adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders' equity as "Accumulated other
comprehensive income". Gains and losses resulting from foreign currency
transactions are included in accumulated other comprehensive income.  There
is no significant fluctuation in exchange rate for the conversion of RMB to USD
after the balance sheet date.
  Research
and Development
 
 Research
and development costs are related primarily to the Company developing its
intellectual property. Research and development costs are expenses as incurred.
The costs of material and equipment that are acquired or constructed for
research and development activities and have alternative future uses are
classified as plant and equipment and depreciated over their estimated useful
lives.
 
 Start-up
Costs
 
 In
accordance with the American Institute of Certified Public Accountants Statement
of Position 98-5, “Reporting on the Costs of Start-up Activities”, the Company
expenses all costs incurred in connection with the start-up and organization of
the Company.
 
 Earnings
per share
 
 Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
There are warrants available for dilution purposes as of December 31,
2007
  F-12
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
   2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 New
accounting pronouncements
  In
September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines
fair value , establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, where fair value is the relevant
measurement attribute. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. The management of the Company is currently evaluating the impact
of adopting SFAS 157 on its consolidated financial statements.
   In
September 2006, the SEC issued SAB No. 108, which provides guidance on the
process of quantifying financial statement misstatements. In SAB No. 108, the
SEC staff establishes an approach that requires quantification of financial
statement errors, under both the iron-curtain and the roll-over methods, based
on the effects of the error on each of the Company’s financial statements and
the related financial statement disclosures. SAB No.108 is generally effective
for annual financial statements in the first fiscal year ending after November
15, 2006. The transition provisions of SAB No. 108 permits existing public
companies to record the cumulative effect in the first year ending after
November 15, 2006 by recording correcting adjustments to the carrying values of
assets and liabilities as of the beginning of that year with the offsetting
adjustment recorded to the opening balance of retained earnings. Management does
not expect that the adoption of SAB No.108 would have a material effect on the
Company’s consolidated financial statements.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115 (“FAS 159”). FAS 159 permits companies to choose to measure many financial
instruments and certain other items at fair value that   are not currently
required to be measured at fair value. The objective of FAS 159 is to provide
opportunities to mitigate volatility in reported earnings caused by  
measuring related assets and liabilities differently without having to apply
hedge accounting provisions. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 will be effective in the first quarter of fiscal 2009. The
Company is evaluating the impact that this statement will have on its
consolidated financial   statements.
  F-13
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed. The
Company has adopted FSP EITF 07-3 and expensed the research and development as
it incurred.
 
 In
December 2007, the FASB issued SFAS No. 160,“Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The Company
has not determined the effect that the application of SFAS 160 will have on its
consolidated financial statements.
 
 In
December 2007, Statement of Financial Accounting Standards No. 141(R), Business Combinations, was
issued. SFAS No. 141R replaces SFAS No. 141, Business Combinations.SFAS
141R retains the fundamental requirements in SFAS 141 that the acquisition
method of accounting (which SFAS 141 called the purchase method) be used for
all business combinations and for an acquirer to be identified for each business
combination. SFAS 141R requires an acquirer to recognize the assets acquired,
the liabilities assumed, and any non-controlling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. This replaces SFAS 141’s cost-allocation process, which required the
cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. SFAS 141R also
requires the acquirer in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and
liabilities, as well as the non-controlling interest in the acquiree, at the
full amounts of their fair values (or other amounts determined in accordance
with SFAS 141R). SFAS 141R applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. The Company is currently evaluating the impact that
adopting SFAS No. 141R will have on its financial statements.
  F-14
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
   3.   INVENTORY
  Packing
      Materials
              
              $
              102,707Raw
      Materials
              
              
              2,660,601Work
      in process
              
              
              210,864Finished
      Goods
              
              
              2,552,963Total
              
              $
              5,527,135
 
 No
allowance for inventory was made for the year ended December 31,
2007.
 
 4.   PROPERTY,
PLANT AND EQUIPMENT, NET
 
 Property,
plant and equipment consist of the following at December 31, 2007:
  Machinery
      & Equipment
              
              $
              5,877,054Automobiles
              
              
              405,054Buildings
              
              
              10,387,500Sub
      total
              
              
              16,669,608Less:
      Accumulated Depreciation
              
              
              (3,371,764
              )Construction
      in
progress
              
              
              2,218,052Total
      property, plant & Equipment, net
              
              $
              15,515,896
  Depreciation
expense for the years ended December 31, 2007 and 2006 was $790,618 and
$536,805, respectively.
 
 5.
              INTANGIBLE
      ASSETS
 
 Intangible
assets include land use right and patent right.
 
 Land use
right – all land in the People’s Republic of China is government owned and
cannot be sold to any individual or company. Instead, the government grants the
user a “Land use right” (the Right) to use the land. The Company has the right
to use the land for 50 years and amortized the Right on a straight-line basis
over 50 years.
 
 Patent –
capitalized patent costs represent the acquisition costs paid for exclusive use
of the patented organic rice seeds.  Capitalized patent costs are
amortized on a straight method over the related patent term of 15
years.
  F-15
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
   
  5.INTANGIBLE ASSETS
(Continued)
  Net
intangible assets at December 31, 2007 were as follows:
  Land
      use right
              
              $
              424,271Patent
              
              
              274,175Less:
      Accumulated amortization
              
              
              (31,661
              )Intangible
      assets, net
              
              $
              666,785
  Amortization
expense for the years ended December 31, 2007 and 2006 amounted to $24,213 and
$6,002, respectively.
 
 6.  OTHER
RECEIVABLES
 
 Other
receivables typically represent cash advances to employees and sales
representatives for normal business purposes. Included in the other receivables
was also an advanced payment in the amount of RMB13,800,000 (approximately
US$1.9 million) made to a organic rice growing project in Donghai, Jiangsu
Province, in anticipation of a good harvest year. The advance was not utilized
because the actual output of the rice was less than expected. The Company
collected the full amount in the first quarter of 2008.
 
 7.
RELATED PARTY LOANS
 
 As of
December 31, 2007, the Company has loans receivable from related parties in the
amount of $2,037,551. All related party loans are provided to the affiliated
retail stores or companies to facilitate the initial establishment of their
businesses for selling the Company’s products. These loans are interest free and
unsecured and are due upon demand. The Company expects to collect most of the
outstanding loans in the next few months. An allowance for doubtful accounts in
the amount of $347,702 was recorded for the year ended December 31,
2007.
 
 8.
SHORT TERM LOAN RECEIVABLE
 
 In August
2007, the Company made a short tem loan of $2,194,774 to the agriculture
production base in Hulan county, Helongjiang Province to help finance the well
sinker and irrigation project due to an unexpected severe drought in the
northern part of China during the summer of 2007. The purpose of the loan was to
support the farmers in order to prevent any further damage to their harvest and
to secure the raw materials for the Company’s own production. The loan was
intended to be interest free and for a short-term period from August 2007 to
March 2008. The management expects the entire loan to be repaid by the end of
March 2008.
  F-16
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
  
  9.
DEPOSITS ON BUILDINGS AND LAND
 
 The
Company made separate deposits in the total amount of RMB12,532,685
(approximately US$ 1.7 million) on one building in Harbin, one office space in
Beijing and a piece of land in Anhui Province it intends to purchase. All
purchases are evidenced by purchase agreements and the transactions were not
finalized as of December 31, 2007. Once the Company completes the title
transfers, the deposits will be reclassified to Property, Plant and Equipment
account.
 
 10.
INVESTMENT ADVANCE
 
 On
December 5, 2007, the Company (“Buyer”) signed an agreement (“Agreement”) with
Shanghai Jin Ao Food Co., Ltd. (“Seller”) to purchase its six (6) Soybean Milk
production lines for a total amount of RMB 30,000,000 (approximately US$4.1
million), including production equipments, technique know-how and marketing
resources. The Agreement calls for the Company (“Buyer”) to make three
installment payments of the full purchase price before January 31, 2008. Once
the payments are made in full, the Seller will transfer the ownership of the
equipments and all related resources to the Buyer. As of December 31, 2007, the
Company made all three-installment payments and recorded the entire amount as
investment advance since the transaction has not been completed yet. Upon
closing of this transaction, the Company will reclassify the amount to fixed
assets and other related accounts.
 
 11.  INCOME
TAXES
 
 The
Company is governed by the Income Tax Law of the People’s Republic of China
concerning the private-run enterprises, which are generally subject to tax at a
statutory rate of 33% (30% state income tax plus 3% local income tax) on income
reported in the statutory financial statements after appropriated tax
adjustments. In 2006, the Company has obtained its foreign-owned entity (“WOFE”)
status upon completion of the reverse acquisition.
 
 According
to the Provisional Regulations of the People ’ s Republic of China on Income
Tax, the Document of Reductions and Exemptions of Income Tax for the Company has
been approved by the local tax bureau and the Management Regulation of Harbin
Economic and Technological Development Zone for the reporting period. The
Company was granted the status of WOFE and therefore is exempt from income tax
from January 1, 2004 through December 31, 2007. The Company has also been
approved to have its tax rate reduced by 50% from January 1, 2008 to December
31, 2010.
  F-17
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  11.  INCOME
TAXES (Continued)
 
 On
March 16, 2007, the National People’s Congress of China approved the
Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”),
which is effective from January 1, 2008. Under the new CIT law, the
corporate income tax rate applicable to all Companies, including both domestic
companies and foreign-invested companies, will be 25%, replacing the current
applicable tax rate of 33%. However, companies previously being approved for any
income holiday will not be subject to the new enacted tax rate until the holiday
runs out.
 
 12.
STATUTORY RESERVES
 
 Pursuant
to the laws of People’s Republic of China, the Company is required to maintain
certain statutory reserves by appropriating from its after-tax profit before
declaration or payment of dividends. The statutory reserves include surplus
reserve fund, common welfare fund and the enterprise fund. These statutory
reserves represent restricted retained earnings.
 
 Surplus reserve
fund
 
 The
Company is generally required to transfer 10% of its net income, as determined
under PRC accounting rules and regulations, to a statutory surplus reserve fund
until such reserve balance reaches 50% of the Company’s registered capital.
However, the laws exclude the companies owned by foreign entities. The Company’s
operating subsidiary, Harbin Yingxia, became a foreign owned entity in 2007 upon
acquisition by the Company. Therefore, it is exempted from making any more
mandatory reserves. It is at the management’s discretion whether to make any
additional reserves.  For the year ended December 31, 2007, the
Company elected not to make any additional funds to this reserve.
 
 The
surplus reserve fund is non-distributable other than during liquidation and can
be used to fund previous years ’ losses, if any, and may be utilized for
business expansion or converted into share capital by issuing new shares to
existing shareholders in proportion to their shareholding or by increasing the
par value of the shares currently held by them, provided that the remaining
reserve balance after such issue is not less than 25% of the registered
capital.
  F-18
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 12.
STATUTORY RESERVES (Continued)
 
 Common welfare
fund
 
 The
Company is required to transfer 5% to 10% of its net income, as determined in
accordance with the PRC accounting rules and regulations, to the statutory
common welfare fund. Making any additional common welfare reserve becomes
voluntary for the Company because its foreign entity status. For the year ended
December 31, 2007, the Company elected not to make any additional funds to this
reserve.
 
 This fund
can only be utilized on capital items for the collective benefit of the Company
’ s employees, such as construction of dormitories, cafeteria facilities, and
other staff welfare facilities. This fund is non-distributable other than upon
liquidation.
 
 Enterprise
fund
 
 The
enterprise fund may be used to acquire fixed assets or to increase the working
capital to expend on production and operation of the business. No minimum
contribution is required and the Company did not make any contribution to this
fund during 2007.
 
 The
following represents the accumulated balances of the appropriations as of
December 31, 2007:
   Surplus
      Reserve
              
              $
              600,975Common
      Welfare Reserve
              
              
              300,488Total
              
              $
              901,463
 
 F-19
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  13.
SEGMENT REPORTING
 
 The
company operates in one operating segment in accordance with the provisions of
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information”. Although the Company develops, manufactures and commercializes
various products such as nutritional food products, dietary supplements,
cosmetic products, raw cactus plants and personal care products etc., the
Company’s chief operating decision maker reviews and evaluates one set of
combined financial information deciding how to allocate resources and in
assessing performance.
 
 For the
year ended December 2007, the Company’s sales revenue from various products are
as follows:
   Nutritional
      Food Products
              
              $
              2,152,812Dietary
      Supplements
              
              
              3,431,914Cosmetic
      Products
              
              
              772,370Raw
      cactus plants
              
              
              6,095,632Personal
      Care Products & others
              
              
              3,459,590Total
              
              $
              15,912,318
  All the
Company’s revenue were generated in China. The Company’s sales in foreign
nations represent pilot programs that as of yet have not become full-scale
operations.
 
 14. STOCKHOLDERS’
EQUITY
 
 A.
Issuance of Common
Stock
 
 July
2007 Private Placement
 
 On July
16, 2007, the Company entered into a stock subscription and warrant agreement,
(“Subscription Agreement”), with three (3) accredited investors. Pursuant to the
Subscription Agreement, the investors purchased 1,000,000 units, each unit
consisting of (a) two shares of common stock and (b) one common stock purchase
warrant, at a purchase price of $2.00 per unit. The Company received net
proceeds of $1,980,000 in connection with this private placement.
 
 With the
warrants attached to the units sold in the private placement, the investors are
entitled to purchase an aggregate of 1,000,000 shares of common stock at an
exercise price of $1.50 per share. All these warrants are exercisable for five
years from the effective date of registration statement.
  F-20
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
 
  14. STOCKHOLDERS’ EQUITY
(Continued)
 
 Upon
completion of the placement, the Company incurred approximately $20,000 in legal
and other expenses.
 
 August
2007 Private Placement
 
 On August
9, 2007, the Company completed another private placement of its securities to
accredited investors pursuant to Regulation D under the Securities Act of 1933,
as amended. The Company entered into a stock subscription agreement and warrant
agreement (“Subscription Agreement”), with twenty (20) accredited investors.
Pursuant to the Subscription Agreement, the investors purchased 34.90052 units,
each unit consisting of (a) 250,000 shares of common stock and (b) a 5-year
stock purchase warrant to purchase 125,000 shares of common stock exercisable at
$2.00 per share. The units were sold for a price of $250,000 per unit, yielding
gross proceeds of $8,725,130 from the sale of the units. The Company paid fees
and commissions in the aggregate amount of $1,398,387 in connection with this
offering.
 
 B.
Warrants
 
 Upon the
execution of the both Subscription Agreements, the Company issued to the
investors (i) 1,000,000 warrants under July 2007 Private Placement and
(ii)4,362,565 warrants under August 2007 Private Placement. All warrants do not
contain a cashless exercise provision. Accordingly, in accordance with EITF
00-19, the warrants are classified as equity.
 
 The fair
value of the warrants was calculated using the Black-Scholes options pricing
model using the following assumptions: Volatility 63%, risk free interest rate
5.050% for July 2007 Placement and 4.790% for August 2007 Placement, and
expected term of 5 years.
 
 Following
is a summary of the status of warrants outstanding as of December 31,
2007:
  Outstanding
      WarrantsExercise
      Price
              
              Number
              
              Average
      Remaining Life$
              1.50
              
              1,000,000
              
              
              4.79$
              2.00
              
              4,362,500
              
              
              4.925,362,500
  F-21
  CHINA
YINGXIA INTERNATIONAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMER
31, 2007 AND 2006
  
  14. STOCKHOLDERS’ EQUITY
(Continued)
 
 C.
Stock issued for
consulting services
 
 105,800
shares of common stock were issued as full compensation to several consultants
for certain consulting services provided to the Company.  An amount of
$212,744, which represents the aggregate fair value of the shares issued in
excess of par value, was included in additional paid-in capital. The full amount
was amortized and included in the Statements of Income as a part of general and
administrative expenses.
 
 As a
result of these offerings, the Company issued a total of 10,830,930 shares of
its common stock. As of December 31 2007, there are 44,439,787 shares of common
stock outstanding and no preferred stock.
 
 15.
COMMITMENTS AND CONTINGENCIES
 
 The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
 
 The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions at exchange rates set by the People’s Bank
of China, the central bank of China. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.
 F-22






CHINA
YINGXIA INTERNATIONAL, INC.
 (PARENT-ONLY)
 
 FINANCIAL
STATEMENTS
 
 DECEMBER
31, 2007
 
 
 
 
 
 
 
 
  F-23
  
 
 CHINA
YINGXIA INTERNATIONAL, INC.
 (PARENT-ONLY)
 
 INDEX
TO CONDENSED FINANCIAL STATEMENTS
 
 
 Condensed
      Balance Sheet at December 31, 2007
                    F-24Condensed
      Statements of Operations for the years ended December 31, 2007 and
      2006
                    F-25Condensed
      Statements of Changes in Stockholders’ Equity for the years ended December
      31, 2007 and 2006
                    F-26Condensed
      Statements of Cash Flows for the years ended December 31, 2007 and
      2006
                    F-27Notes
      to Condensed Financial Statements
                    F-28
      - F-32
 
 
 
 
 
  F-24
    CHINA
YINGIXA INTERNATIONAL INC.
 (PARENT-ONLY)
 CONDENSED
BALANCE SHEET
 December
31, 2007
 ASSETSCurrent
      assets:Cash
      and Cash Equivalents
                
                $
                19,331Total
      Current Assets
                
                
                19,331Other
      assets:Investment
      in Subsidiary
                
                
                9,176,485Total
      Other Assets
                
                
                9,176,485Total
      Assets
                
                $
                9,195,816LIABILITIES
      AND STOCKHOLDERS' EQUITYTotal
      Liabilities
                
                $
                -Stockholders'
      Equity:Preferred
      stock, $0.001 par value, 10,000,000 shares authorized; - 0
      -shares
      outstanding at December 31, 2006
                
                
                -Common
      stock, $0.001 par value, 100,000,000 shares
authorized;44,439,787
      shares issued and outstanding as of December 31, 2007
                
                
                44,440Additional
      paid-in-capital
                
                
                9,474,895Retained
      earnings-unappropriated
                
                
                (323,519
                )Total
      Stockholders' Equity
                
                
                9,195,816Total
      Liabilities and Stockholders' Equity
                
                $
                9,195,816
 
 F-25
  CHINA
YINGIXA INTERNATIONAL INC.
 (PARENT-ONLY)
 CONDENSED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31,
 2007
                
                
                2006Revenues
                
                $
                -
                
                
                $
                -Cost
      of Goods Sold
                
                
                -
                
                
                
                -Gross
      Profit
                
                
                -
                
                
                
                -Operating
      ExpensesSelling,
      general and administrative
                
                
                323,519
                
                
                
                61,527Income
      before other Income and (Expenses)
                
                
                (323,519
                )
                
                
                (61,527
                )Other
      Income and (Expenses)Interest
      Income
                
                
                -
                
                
                
                2Gain
      on settlement of debt
                
                
                -
                
                
                
                95,952Income
      (loss) Before Income Taxes (Benefits)
                
                
                (323,519
                )
                
                
                34,427Provision
      for Income Taxes (Benefits)
                
                
                -
                
                
                
                -Net
      Income (loss)
                
                $
                (323,519
                )
                
                $
                34,427Basic
      and diluted income per common shareBasic
                
                $
                (0.01
                )
                
                $
                0.00Diluted
                
                $
                (0.01
                )
                
                $
                0.00Weighted
      average number of common sharesBasic
                
                
                37,995,417
                
                
                
                17,157,810Diluted
                
                
                40,176,812
                
                
                
                17,157,810
 
 F-26
 
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 RetainedPreferred
      Stock
                
                
                Common
      Stock
                
                
                
                
                
                Earningspar
      value $0.001
                
                
                par
      value $.001
                
                
                Additional
                
                
                (AccumulatedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Paid
      in Capital
                
                
                Deficits)
                
                
                TotalBalance,
      January 1, 2006
                
                
                59,183
                
                
                $
                59
                
                
                
                4,016,064
                
                
                
                4,016
                
                
                $
                6,448,324
                
                
                $
                (7,180,227
                )
                
                $
                (727,828
                )Covervsion
      of Preferred Stock (Note 1)
                
                
                (59,183
                )
                
                
                (59
                )
                
                
                29,592,793
                
                
                
                29,593
                
                
                
                (29,424
                )
                
                
                
                
                
                
                110-Net
      income from January 1, 2006 to May 12, 2006
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                34,427
                
                
                
                34,427-Effect
      of reverse acquisition occurred on May 12, 2006
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (6,418,900
                )
                
                
                7,145,800
                
                
                
                726,900Balance,
      December 31, 2006
                
                
                -
                
                
                
                -
                
                
                
                33,608,857
                
                
                $
                33,609
                
                
                $
                -
                
                
                $
                -
                
                
                $
                33,609Issurance
      of common stock for financing
                
                
                
                
                
                
                
                
                
                
                10,725,130
                
                
                
                10,725
                
                
                
                9,262,151
                
                
                
                
                
                
                
                9,272,876Issuance
      of common stock for consulting services
                
                
                
                
                
                
                
                
                
                
                105,800
                
                
                
                106
                
                
                
                212,744
                
                
                
                
                
                
                
                212,850Net
      income (loss)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (323,519
                )
                
                
                (323,519
                )Balance
      December 31, 2007
                
                
                -
                
                
                $
                -
                
                
                
                44,439,787
                
                
                $
                44,440
                
                
                $
                9,474,895
                
                
                $
                (323,519
                )
                
                $
                9,195,816
  F-27
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 CONDENSED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31,
 2007
                
                
                2006Cash
      Flows From Operating Activities:Net
      income (loss)
                $
                (323,519
                )
                
                $
                34,427Adjustments
      to reconcile net income (loss) to net cashprovided
      by (used in) operating activities:Depreciation
      and amortization
                
                -
                
                
                
                88Consulting
      fees paid thorugh the issuance of common stocks
                
                212,850
                
                
                
                -Gain
      on settlement of debt
                
                -
                
                
                
                (95,952
                )Changes
      in operating assets and liabilities:Receivables
                
                -
                
                
                
                9,121Prepaid
      expenses
                
                -
                
                
                
                38Accounts
      payable and accrued liabilities
                
                -
                
                
                
                53,734Cash
      provided by (used in) operating activities
                
                (110,669
                )
                
                
                1,456Cash
      Flows From Investing Activities:Purchase
      of property and equipment
                
                -
                
                
                
                -Cash
      (used in) investing activities
                
                -
                
                
                
                -Cash
      Flows From Financing ActivitiesNet
      proceeds from issuance of common stock
                
                9,272,876
                
                
                
                -Payment
      to shareholders upon reverse merger
                
                -
                
                
                
                (5,827
                )Payment
      on investment in subsidiary
                
                (9,142,876
                )
                
                
                -Cash
      provided by (used in) financing activities
                
                130,000
                
                
                
                (5,827
                )Increase
      (Decrease) in cash and cash equivalents
                
                19,331
                
                
                
                (4,371
                )Cash
      and Cash Equivalents - Beginning of year
                
                -
                
                
                
                4,371Cash
      and Cash Equivalents - Ending of year
                $
                19,331
                
                
                $
                -Supplemental
      disclosures of cash flow informationDuring
      the year, cash was paid for the following:Interest
                
                -
                
                
                
                -Taxes
                $
                -
                
                
                $
                -Non-cash investing and
      financing activities:Share
      issued for consulting services
                $
                212,850
                
                
                $
                -
 F-28
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 DECEMER
31, 2007
 1.
ORGANIZATION AND BASIS OF PRESENTATION
 
 China
Yingxia International (the “Company” or “China Yingxia”) was incorporated in the
State of Florida on May 6, 1996 and formerly known as Agronix, Inc.
(“Agronix”).
  On May
12, 2006, the Company entered into a share exchange agreement with Warner
Nutraceutical International, Inc. (‘WNI”), which is the parent company to Harbin
Yingxia Business Group Co, Ltd. ("Yingxia"). Pursuant to the share exchange
agreement, the Company issued to WNI shareholders 54,811,475 shares of Common
Stock, par value $0.001 per share, and 1,473,649.074 shares of Class A Preferred
Stock, par value $0.001 per share, of which each share is convertible into five
hundred (500) shares of the Company’s Common Stock. As a result of the
transactions, there has been a change in control of the Company as the
shareholders of WNI became the majority shareholders of the
company.
   For
accounting purpose, the transaction has been accounted for as a reverse
acquisition under the purchase method. Accordingly, WNI and its subsidiary are
treated as the continuing entity for accounting purposes. Following the merger,
Agronix filed Certificate of Amendment and changed its name to China Yingxia
International, Inc.
   On
July 21, 2006, the company’s board of directors approved a reverse stock spilt
on both common stock and preferred stock.  Each 24.9 shares of the
Company's Common Stock and Class A Preferred Stock were converted into one (1)
share of Common Stock and one (1) share of Class A Preferred Stock,
respectively. Simultaneously, all of the preferred shares were converted into
common shares at ration of 1 to 500 and the preferred shares were cancelled. As
of December 31, 2006, there are 33,608,857 shares of Common Stock outstanding
and no Preferred Stock.
   The
Company operates its business through its wholly-owned subsidiary Harbin Yingxia
Business Group, Ltd. (" Harbin Yingxia"), a joint stock corporation organized
and existing under the laws of the People's Republic of China (“PRC”) in 1998.
Harbin Yingxia is engaged in the development, manufacture and distribution of
organic nutritional food products and dietary supplements. Relying on the raw
materials produced in the soybean production base, green cactus production base
and organic millet production base, Yingxia produces and distributes hundreds of
serial products of high quality, high nutrition, and high added
value.
   F-29
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 DECEMER
31, 2007
  
 1.
ORGANIZATION AND BASIS OF PRESENTATION (Continued)
  The
Company’s condensed financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America (“US
GAAP”). The condensed financial statements of China Yingxia include the accounts
of the Company only.
  The
accompanying financial statements and footnotes have been condensed and
therefore do not contain all disclosures required by generally accepted
accounting principles. It is suggested that these condensed financial statements
be read in conjunction with the December 31, 2006 audited consolidated financial
statements and the accompanying notes thereto.
 
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use
of estimates
 
 In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting year. Significant estimates, required by management, include the
recoverability of long-lived assets and the valuation of
inventories.  Actual results could differ from those
estimates.
 
 Cash
and cash equivalents
 
 For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
 
 Investment
in subsidiary
 
 Investment
in subsidiary refers to the 100% shareholding in Warner Nutraceutical
International Inc., which the Company acquired through the reverse acquisition
on May 12, 2006. The Company invested additional $9,142,876 in WNI upon
completion of its July and August 2007 financing.
  F-30
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 DECEMER
31, 2007
  
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Stock-based
compensation
 
 Effective
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-Based Payments,” which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No. 123(R), stock-based
compensation is measured at the grant date, based on the calculated fair value
of the award. And it is recognized as an expense over the requisite employee
service period (generally the vesting period of the grant).
 
 The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.  The fair value of the option
issued is used to measure the transaction, as this is more reliable than the
fair value of the services received.  Fair value is measured as the
value of the Company’s common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s
performance is complete.  The fair value of the equity instrument is
charged directly to compensation expense and additional paid-in
capital.
  3. STOCKHOLDERS’
EQUITY
 
 A.
Issuance of Common
Stock
 
 July
2007 Private Placement
 
 On
July 16, 2007, the Company entered into a stock subscription and warrant
agreement, (“Subscription Agreement”), with three (3) accredited investors.
Pursuant to the Subscription Agreement, the investors purchased 1,000,000 units,
each unit consisting of (a) two shares of common stock and (b) one common stock
purchase warrant, at a purchase price of $2.00 per unit. The Company received
net proceeds of $1,980,000 in connection with this private
placement.
 
 With
the warrants attached to the units sold in the private placement, the investors
are entitled to purchase an aggregate of 1,000,000 shares of common stock at an
exercise price of $1.50 per share. All these warrants are exercisable for five
years from the effective date of registration statement.
  F-31
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 DECEMER
31, 2007
  
 3. STOCKHOLDERS’ EQUITY
(Continued)
 
 Upon
completion of the placement, the Company incurred approximately $20,000 in legal
and other expenses.
 
 August
2007 Private Placement
 
 On
August 9, 2007, the Company completed another private placement of its
securities to accredited investors pursuant to Regulation D under the Securities
Act of 1933, as amended. The Company entered into a stock subscription agreement
and warrant agreement (“Subscription Agreement”), with twenty (20) accredited
investors. Pursuant to the Subscription Agreement, the investors purchased
34.90052 units, each unit consisting of (a) 250,000 shares of common stock and
(b) a 5-year stock purchase warrant to purchase 125,000 shares of common stock
exercisable at $2.00 per share. The units were sold for a price of $250,000 per
unit, yielding gross proceeds of $8,725,130 from the sale of the units. The
Company paid fees and commissions in the aggregate amount of $1,398,387 in
connection with this offering.
 
 B.
Warrants
 
 Upon
the execution of the both Subscription Agreements, the Company issued to the
investors (i) 1,000,000 warrants under July 2007 Private Placement and
(ii)4,362,565 warrants under August 2007 Private Placement. All warrants do not
contain a cashless exercise provision. Accordingly, in accordance with EITF
00-19, the warrants are classified as equity.
 
 The
fair value of the warrants was calculated using the Black-Scholes options
pricing model using the following assumptions: Volatility 63%, risk free
interest rate 5.050% for July 2007 Placement and 4.790% for August 2007
Placement, and expected term of 5 years.
 
 Following
is a summary of the status of warrants outstanding as of December 31,
2007:
 Outstanding
      WarrantsExercise
      Price
                    
                    
                    Number
                    
                    
                    Average
      Remaining Life$
                    1.50
                    
                    
                    
                    1,000,000
                    
                    
                    
                    4.79$
                    2.00
                    
                    
                    
                    4,362,500
                    
                    
                    
                    4.925,362,500
 F-32
 CHINA
YINGXIA INTERNATIONAL INC.
 (PARENT-ONLY)
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 DECEMER
31, 2007
  
 3. STOCKHOLDERS’ EQUITY
(Continued)
 
 C.
Stock issued for
consulting services
 
 105,800
shares of common stock were issued as full compensation to several consultants
for certain consulting services provided to the Company.  An amount of
$212,744, which represents the aggregate fair value of the shares issued in
excess of par value, was included in additional paid-in capital. The full amount
was amortized and included in the Statements of Operations as a part of general
and administrative expenses.
 
 As a
result of these offerings, the Company issued a total of 10,830,930 shares of
its common stock. As of December 31 2007, there are 44,339,787 shares of common
stock outstanding and no preferred stock.
  F-33




Item
8.    Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.




None.




Item
8A.    Controls and Procedures




Evaluation
of Disclosure Controls and Procedures




We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules, regulations and related forms, and that
such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.





Our
management is also responsible for establishing and maintaining adequate
internal control over financial reporting. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.







Our
internal control over financial reporting includes those policies and procedures
that:





·
            Pertain
      to the maintenance
      of records that, in reasonable detail, accurately and fairly reflect the
      transactions and dispositions of the assets of the
  Company;





·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of the Company’s management
      and directors; and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.




17






ITEM
8A(T)               CONTROLS
AND PROCEDURES




(a)Management’s Report on Internal
Control over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the (i) effectiveness and efficiency of operations, (ii) reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and (iii)
compliance with applicable laws and regulations. Our internal controls framework
is based on the criteria set forth in the Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
  Due to
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.
  A
material weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material misstatement of the Company’s annual or interim financial statements
that is more than inconsequential will not be prevented or detected. In the
course of making our assessment of the effectiveness of internal controls over
financial reporting, we identified some material weaknesses in our internal
control over financial reporting.
  ·
                We
      lack sufficient personnel with the appropriate level of knowledge,
      experience and training in the application of accounting operations of our
      company. This weakness causes us to not fully identify and resolve
      accounting and disclosure issues that could lead to a failure to perform
      timely internal control and
reviews.
 
 Management
is currently reviewing its staffing and systems in order to remedy the
weaknesses identified in this assessment.  However, because of the above
condition, management’s assessment is that the Company’s internal controls over
financial reporting were not effective as of December 31, 2007.
  This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
  (b) Changes in Internal Control over
Financial Reporting
  There
were no changes in internal controls over financial reporting that occurred
during 2007 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.


Item
8B.    Other Information





None.






18





PART III




Item
      9.
            Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act.




The
following table sets forth the name, age and position of each of our executive
officers and directors as of March 31, 2008.





Name
            
            Age
            
            Position
            
            Date
      Appointed DirectorYingxia
      Jiao
            
            56
            
            President,
      Chief Executive Officer, Chief Financial Officer and
      Chairwoman
            
            May
      12, 2006Lixue
      Deng
            
            28
            
            Director
            
            May
      29, 2007Dr.
      Zhaobo Wang
            
            53
            
            Director
            
            February
      8, 2007





Set forth
below is a brief description of the background and business experience of our
executive officers and directors for the past five years (and, in some
instances, for prior years).





Yingxia Jiaobecame our Chief
Executive Officer, Chief Financial Officer and Director upon consummation of the
Reverse Merger on May 12, 2006. She graduated from Harbin University of Chinese
Medicine in 1997 and is a certified nutritionist of Heilongjiang province. She
had many years experience in the medical field and hospital management before
she founded the Yingxia group in 1998. She still serves as its President and
CEO. Since October 2000, she has served as Vice Chairman of the Senior Welfare
Foundation of Heilongjiang. Since August 2002, she has also served as the Vice
Chairman of the Safe Food Association of Heilongjiang. In addition, since June
2004, she has served as the Vice Chairman of the Association of Corporate
Management of Heilongjiang.





Lixue Dengwas appointed on
May 29, 2007 as a member of the Board of Directors Mr. Deng is the son of
Yingxia Jiao, our Chairwoman, Chief Executive Officer and Chief Financial
Officer, and has been working for Harbin Yingxia since 2004.  Mr. Deng
studied business management at the University of Essex in Colchester, UK from
2000-2003.





Dr. Zhaobo Wangwas appointed
as an independent Director on February 8, 2007 and serves on the Nominating and
Corporate Governance Committee and is also the acting Chairman of the Audit
Committee. Dr. Wang is a distinguished educator with business experience. Dr.
Wang has been a professor of Operations Management/Business Statistics of
Fairleigh Dickinson University (FDU) since 1992. He established the Chinese
American Business Institute at FDU where he serves as the first director. Dr.
Wang was elected as the first ever Asian-American school board member of Edison
Township. Dr. Wang received his Ph.D. in Operations Management in 1992 and MBA
in Management Information Systems in1990 from Rutgers University.




Term of
Office




Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.





Audit
Committee





The
Company has an audit committee charter. The audit committee: (i) appoints the
Company's independent auditors and monitors the independence of the Company's
independent auditors; (ii) reviews the Company's policies and procedures on
maintaining its accounting records and the adequacy of its internal controls;
(iii) reviews management's implementation of recommendations made by the
independent auditors and internal auditors; (iv) considers and pre-approves the
range of audit and non-audit services performed by independent auditors and fees
for such services; and (v) reviews and votes on all transactions between the
Company and any of its officers, directors or other affiliates.





Mr. Wang
serves as Acting Chairman of the Audit Committee and is an independent
director.






19







Code of
Ethics





On May
12, 2006 pursuant to the Reverse Merger, we adopted a new Code of Ethics that
applies to our principal executive officer and principal financial officer. This
new Code of Ethics replaces the prior Code of Ethics adopted November 12, 2003
and is attached as Exhibit 14.1.





Significant
Employees





None.





Family
Relationships





Mr. Deng
is the son of our chairwoman, Ms. Jiao.





Involvement in Certain Legal
Proceedings




To our
knowledge, during the past five years, none of our directors, executive
officers, promoters, control persons, or nominees has been:






•
            the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that
    time;











•
            convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor
  offenses);











•
            subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or











•
            found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities
law.






Compliance with Section
16(a) of the Exchange Act




Section
16(a) of the Securities Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than 10 percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC). Officers,
directors, and greater than 10 percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.





To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company, all reports under Section 16(a) required to be filed
by its officers and directors and greater than ten percent beneficial owners
were timely filed as of the date of this filing.




Item
10.    Executive Compensation.




Compensation of Executive
Officers




The
following summary compensation table sets forth in U.S. dollars all compensation
awarded to, earned by, or paid to the named executive officers paid by us during
the fiscal years ended December 31, 2007 and 2006 in all capacities for the
accounts of our executives, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO):






20





SUMMARY
COMPENSATION TABLE




Name
      and Principal Position
            
            
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
      Awards
              ($)
            
            
            Option
      Awards
              ($)
            
            
            Non-Equity Incentive Plan
      Compensation ($)
            
            
            Non-Qualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation
              ($)
            Totals
              ($)Yingxia
      Jiao,(1)
            
            
            2007
            
            15,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            15,000Chief
      Executive Officer,
            
            
            2006
            
            12,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            12,000Chief
      Financial Officer,PresidentBrian
      Hauff,(2)
            
            
            2007
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            0Chief
      Executive Officer,
            
            
            2006
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            0Chief
      Financial Officer,President





(1)
            Ms.
      Jiao was appointed as our President, Chief Executive Officer and Chief
      Financial Officer on May 12, 2006 pursuant to the Reverse Merger. Prior to
      the Reverse Merger, she earned $10,000 as an officer of
      Yingxia.(2)
            Mr.
      Hauff resigned as President, Chief Executive Officer and Chief Financial
      Officer on May 12, 2006 pursuant to the Reverse
  Merger.





Outstanding Equity Awards at Fiscal
Year-End Table. There were no individual grants of stock options to
purchase our common stock made to the named executive officers in the Summary
Compensation Table during the fiscal year ended December 31, 2007, and the
subsequent period up to the date of the filing of this report.




Employment
Agreements




None of
our executive officers have employment agreements.




Compensation of
Directors




For the
fiscal year ended December 31, 2006, we did not compensate our directors for
their services.




Subsequently,
on February 8, 2007 we entered into independent director agreements with Dr.
Wang and Mr. Montiel which set forth their duties as an independent director and
the terms of compensation. Pursuant to the terms of the agreement, the Company
agreed to pay to Dr. Wang and Mr. Montiel a fee of $1,500 and $3,000,
respectively, for each formal Board and Committee meeting in which the director
participates, either in person or by teleconference and an aggregate value of
$20,000 per annum in the form of restricted shares of the Company’s common
stock, calculated based on the average closing price per share for the five (5)
trading days preceding and including January 1 of such year.





On May
22, 2007, we accepted the resignation of Gerald Montiel from his position with
us as an independent member of the Board of Directors and canceled the
independent director’s agreement with Mr. Montiel. His resignation was not a
result of any disagreement with us.





On May
29, 2007, the Board of Directors appointed Lixue Deng as a member of the Board
of Directors to fill Mr. Montiel’s vacancy.  Mr. Deng is the son of Yingxia
Jiao, our Chairwoman, Chief Executive Officer and Chief Financial Officer. His
annual salary is $36,000.






21




Item
11.    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.




The
following table sets forth certain information regarding the ownership of our
capital stock, as of March 31, 2008, for: (i) each director; (ii) each person
who is known to us to be the beneficial owner of more than 5% of our outstanding
common stock; (iii) each of our executive officers named in the Summary
Compensation Table; and (iv) all of our current executive officers and directors
of as a group. Except as otherwise indicated in the footnotes, all information
with respect to share ownership and voting and investment power has been
furnished to us by the persons listed. Except as otherwise indicated in the
footnotes, each person listed has sole voting power with respect to the shares
shown as beneficially owned.





Title
      of Class
            
            Name
      and Address of Beneficial Owner
            
            Amount
      and Nature of Beneficial Ownership
            
            Percent
      of Class (2)Common
      Stock
            
            Yingxia
      Jiao(1)
            
            15,348,800
            
            34.51%Common
      Stock
            
            Dr.
      Zhaobo Wang
            
            10,000
            
            0.02%Common
      Stock
            
            Lixue
      Deng(1)
            
            1,512,000
            
            3.39%Common
      Stock
            
            Lantin
      Deng(3)
            
            4,801,600
            
            10.79%Common
      Stock
            
            All
      officers and directors as a group (3 in number)
            
            20,650,400
            
            37.93%





(1) The
person listed is an officer and/or director of the Company and the address for
each beneficial owner is Harbin Yingxia Industrial Co., Ltd, No.300, Xidazhi
Street Nangang, Harbin Heilongjiang  China 150001.




(2)Based on
44,479,626 shares of Common Stock issued and outstanding as of March 28,
2008.


(3)  Mr Deng is the husband of our Chairwoman and
CEO.




Item
12.    Certain Relationships and Related
Transactions.


As of
December 31, 2007, the Company has loans receivable from related parties in the
amount of $2,037,551. All related party loans are provided to the affiliated
retail stores or companies to facilitate the initial establishment of their
businesses for selling the Company’s products. These loans are interest free and
unsecured and are due upon demand. The Company expects to collect most of the
outstanding loans in the next few months. An allowance for doubtful accounts in
the amount of $347,702 was recorded for the year ended December 31,
2007.


22






Item
13.    Exhibits and Reports on Form 8K.





a)
            Exhibits


EXHIBIT
INDEX




The
following exhibits are incorporated by reference or included as part of this
report:




Exhibit No.
            
            Title
      of Document
            
            Location2.1
            
            Agreement
      of Merger and Plan of Reorganization among Agronix, Inc., Agronix
      Acquisition Corp., and Warner Nutraceutical International,
      Inc.
            
            Incorporated
      by reference as Exhibit 10.1 to Form 8-K filed May 12,
  20063.1.1
            
            Articles
      of Incorporation
            
            Incorporated
      by reference to Form 10-SB filed May 17, 20003.1.2
            
            Amendment
      to Articles of Incorporation
            
            Incorporated
      by reference to Form 10-SB filed May 17, 20003.1.3
            
            Amendment
      to Articles of Incorporation
            
            Incorporated
      by reference to Form 10-KSB filed April 2, 20073.1.4
            
            Certificate
      of Designation of Class A Preferred Stock
            
            Incorporated
      by reference as Exhibit 10.1 to Form 8-K filed May 12,
  20063.2
            
            Bylaws
            
            Incorporated
      by reference to Form 10-SB filed May 17, 200010.1
            
            Subsidiary
      Purchase Agreement
            
            Incorporated
      by reference as Exhibit 10.2 to Form 8-K filed May 12,
  200614.1
            
            Code
      of Ethics
            
            Incorporated
      by reference to Form 10-KSB filed April 2, 200721.1
            
            Subsidiaries
            
            Incorporated
      by reference to Form 10-KSB filed April 2, 200731.1
            
            Certification
      of Chief Executive Officer and Chief Accounting Officer Pursuant to
      Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            
            Filed
      herewith32.1
            
            Certification
      of Chief Executive Officer and Chief Accounting Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
            
            Filed
      herewith




b)
Reports on Form 8-K:





On
November 28, 2007, the Company filed a report on Form 8K disclosing its
unaudited operating results for the third quarter of 2007





Item
14.    Principal Accounting Fees and Services.




Audit
Fees





For
the Company’s fiscal years ended December 31, 2007 and 2006, we were billed
approximately $ $72,528 and $50,000 for professional services rendered for the
audit and review of our financial statements filed with the Securities and
Exchange Commission for our years ended December 31, 2007 and 2006,
respectively.




Tax Fees




For our
fiscal years ended December 31, 2007 and 2006, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.




All Other
Fees




The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal years ended December 31, 2007 and
2006.






23







SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




CHINA
      YINGXIA INTERNATIONAL, INC.Date: April
      9,
      2008
            By:
            /s/ Yingxia
      JiaoYINGXIA
      JIAOPresident,
      Chief Executive Officer,
              Chief
      Financial Officer, Chief Accounting Officer, and
  Chairwoman






In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Name
            
            Title
            
            Date/s/
      Yingxia Jiao
              
              YINGXIA
      JIAO
            
            President,
      Chief Executive Officer,
              Chief
      Financial Officer, Chief Accounting Officer, and
Chairwoman
            
            April
      9, 2008/s/
      Lixue Deng
              Lixue
      Deng
            
            Director
            
            April 9,
      2008/s/
      Dr. Zhaobo Wang
              DR.
      ZHAOBO WANG
            
            Director
            
            April 9,
      2008







24